In what may finally be the conclusion of Elon Musk’s proposed dramatic takeover of Twitter, things took a turn for the worse. Musk initially seemed certain of his plans to take over Twitter after he secretly purchased over 9% before disclosing his stake in the social media company. He was offered a seat on Twitter’s board, which at first he eagerly accepted until he discovered that it limited his potential stake in the company to under 15%. The board then made attempts to prevent his purchase by adopting a poison pill. This move would limit the Tesla CEO’s stock after he had acquired over 15% and allow for other shareholders to purchase further stocks at a discounted price, diluting Musk’s position, and removing his ability to become a majority shareholder. Musk then presented his financial plan to take over the company at $44bn – which swayed the board – and they somehow changed their mind about the takeover. It seemed as though Musk was sure to be the proud new owner of his very own Twitter, where his dreams of free speech would become a reality. However, this came at the expense of Musk’s automotive and clean energy company, Tesla. The erratic nature of the Twitter acquisition caused Tesla investors to become sceptical about the charismatic entrepreneur’s ability to manage multiple companies at once. Tesla lost around 30% of its value due to this proposed acquisition. And Musk took major losses as he sold his Tesla stock at this low price to acquire Twitter, as well as placing margin loans against Tesla. Musk may be taking this out on the employees of Tesla, telling them they need to work in the office for at least 40 hours a week, and if they are unhappy with this new rule, “They should pretend to work somewhere else”. It has also been revealed that the electric vehicle maker is looking to lay off 10% of its salaried staff, Musk believes that many sectors of the company are overstaffed. His lawyers have given him a way out of the Twitter deal, which seems to be infecting his other business ventures, and the bots which plague the platform might just give the billionaire a way out. More in this article which first appeared in The Wall Street Journal. – Ross Sinclair
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Elon Musk Threatens to End Deal With Twitter
Tesla CEO accuses Twitter of not complying with his request for data on spam and fake accounts on social-media platform
By Will Feuer
Elon Musk threatened to terminate his deal to buy Twitter Inc. in a letter accusing the company of not complying with his request for data on the number of spam and fake accounts on the social-media platform.
Mr. Musk said Twitter has refused to provide the data necessary for Mr. Musk to facilitate his own evaluation of the number of spam and fake accounts. In April, Twitter accepted Mr. Musk’s $44 billion bid to take over the company and go private. As part of the deal, Mr. Musk waived detailed due diligence that buyers typically perform on targets.
In a letter to Twitter Chief Legal Officer Vijaya Gadde, Mr. Musk’s lawyer Mike Ringler said Mr. Musk is entitled to the requested data, in part so that he can facilitate the financing of the deal.
Mr. Musk has lined up a group of 19 investors to back his deal. He has also said in filings that he is holding talks with other current Twitter shareholders, including co-founder Jack Dorsey, to roll their shares over into the private company.
“In any event, Mr. Musk is not required to explain his rationale for requesting the data, nor submit to the new conditions the company has attempted to impose on his contractual right to the requested data,” Mr. Ringler wrote. “At this point, Mr. Musk believes Twitter is transparently refusing to comply with its obligations under the merger agreement.”
“This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement,” he said.
Representatives for Twitter didn’t immediately return a request for comment. The company has said it was moving forward with the transaction. Shares of Twitter fell 5% to $38.05 in morning trading; the all-cash deal is priced at $54.20 a share.
For years, Twitter had publicly disclosed its own estimate of how many of its daily active users represent false or spam accounts, putting the percentage at fewer than 5% of its daily active users. Mr. Musk has pegged the figure at least four times as high at 20% of Twitter’s accounts.
In his letter Monday, Mr. Ringler confirmed Mr. Musk received a response from Twitter on June 1, but said it didn’t satisfy Mr. Musk’s requests.
Mr. Musk offered to buy Twitter for $44 billion in April, and the company agreed to the deal the same month. In May, the Tesla Inc. chief executive said the deal was “temporarily on hold” because of his concerns over the company’s accounting of the number of fake accounts on its platform.
Mr. Musk’s escalation of the bot issue last month raised suspicions among observers that he is using it as a negotiating tactic to lower the price amid a swooning market, or to exit the takeover deal.
As part of the deal, both sides agreed to pay each other a $1 billion breakup fee if they cause the deal not to happen for certain reasons, but specific scenarios must unfold for those to become relevant. Twitter could also sue to force Mr. Musk to go through with the transaction.
The Tesla CEO has complained about fake accounts on Twitter for years—long before he agreed to buy the platform. In 2018, he tweeted, “Lots of fake accounts on Twitter characterized by high following/follower ratio to make it seem like many real people when it isn’t. Wonder why.”
On Saturday, Mr. Musk brought attention to a tweet suggesting spam and bots were being used for “misinformation and fake news against Elon.” Mr. Musk’s one-word reply to the tweet, “Interesting,” got more than 20,000 likes.
Spam and fake accounts are an industrywide problem and can cause problems for advertisers and bad experiences for users. The accounts can be difficult to detect and are commonly managed by bots, which are computer programs that can automate posts and replies. Many bots have been programmed to achieve illicit goals, such as spreading false information and tricking people into spending money, tech and social-media analysts say, but others have more benign purposes, such as sharing news and weather alerts.
Mr. Musk has had unusually extensive interactions with bots. As a habitual tweeter with more than 95 million followers, the Tesla CEO likely has far greater exposure and experience with fake and spam accounts than most on the social-media platform, researchers say. Around 70% of Mr. Musk’s followers on Twitter are spam, fake or inactive, versus 41% for all other accounts with between 65 million and 120 million followers, according to an estimate last month from SparkToro LLC, a maker of audience-research software.
Sarah E. Needleman contributed to this article.
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